Disney Shares Drop Almost 50%, Destroying Shareholders

By Douglas A. McIntyre Updated Jul 5, 1:10PM EDT · Published Jul 4, 10:27AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Disney Shares Drop Almost 50%, Destroying Shareholders — © David Peperkamp / iStock Editorial via Getty Images

Long-time shareholders of Walt Disney Company are enraged. Its shares are down 45% over the last year, and much more from when they peaked last November. Disney has lost over $150 billion of its market cap since then.

Disney was the envy of the multimedia industry for years. Under former CEO Bob Iger, it bested the results of other industry giants from Time Warner, to Fox, to Paramount, to CBS. Its studios put out a string of wildly successful films from franchises, which included Pixar, Star Wars and Marvel.

However, Disney’s theme parks were almost decimated by the COVID-19 pandemic. It had to shutter these parks and lay off tens of thousands of people. Over the past several months, traffic to these parks has moved up to near pre-pandemic levels but may level off.
[nativounit]
Disney’s most recently reported quarter was mediocre, given that it was rebounding from the COVID-19 pandemic. Revenue rose 23% to $19.2 billion. Net income fell 48% to $470 million. Bob Chapek, the company’s CEO commented: “Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services—with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million—once again proved that we are in a league of our own.”

What Chapek did not say is that the growth of Disney+ slowed considerably. In a crowded field dominated by Netflix and Amazon Prime, the sharp increase in Disney+ subscribers, until recently, is probably over. Disney has bet its future on the digital world, and that is not paying off.

Michael Morris and analysts at Wall Street’s Guggenheim recently downgraded Disney shares. He expressed concern that traffic to Disney theme parks will not improve much. He also worries about the billions of dollars the company must spend to maintain the growth of Disney+.
[wallst_email_signup]

Investors in Disney have watched a huge portion of the company’s value be destroyed. If Morris is right, that is not over.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.